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Black Women Struggle To Fund Startups

From the trunk of her Toyota Corolla, 53-year-old Charmaine DaCosta delivers her Jamaican limeade to grocery stores and delis in Manhattan and Brooklyn.

“I do my own delivery, make the product and I [watch] over every process,” DaCosta said of her beverage company Limation. “All the financial responsibility falls squarely on me.”

DaCosta is one of many minority female entrepreneurs driving the market — it’s the fastest growing demographic launching businesses. And in fact, minority women lead over 25% of the 8 million female-owned businesses in the United States, according to the Center for American Progress.

The challenge for most African-American women isn’t the entrepreneurial spirit, it’s having sufficient access to funding and venture capital, according to CAP, a Washington D.C.-based think tank.

“It’s been very difficult because I have no cash,” DaCosta said. The Jamaican-born Harlem resident created a business plan for her beverage line two years ago, but it wasn’t until she won $5,000 from a business competition last year that she began to forge ahead.

The seed money covered insurance and part of the trademarking, but “it was gone in a blink of eye,” DaCosta said.

DaCosta used to make batches of the limeade for friends and family. She decided to bottle it after being downsized from her office job at a local nonprofit. Using her own cash and that of several individual investors, she launched the beverage line in New York City in June.

DaCosta plans to forgo a traditional bank loan and sell her Harlem apartment in order to fund distribution in the Tri-State area.

She’s not alone. Many single black female entrepreneurs have to contribute their personal funds and rely on their community, family and friends to help with start-up capital, said Farah Ahmad, policy analyst for race and ethnicity at the Center for American Progress.

“While women-owned businesses are the fastest-growing segment, and many succeed, women must overcome barriers that their male competitors do not face,” read a 2013 Senate report on small business and entrepreneurship. “In the area of capital, studies find that women do not get sufficient access to loans and venture capital.”

A study by the Kaufman Foundation echoed that sentiment, finding that women receive 80% less capital than men in their first year of business.

“Access to capital is pretty much nonexistent within the black community, so you’re going to need an angel or a venture capital group,” said Melissa Butler, a 28-year-old Michigan native.

Butler left her job on Wall Street last year to launch a lipstick line Lip Bar, which is now sold at Urban Outfitters. She used more than $30,000 of her own money to manufacture and market the product. The rest of the funding has come from sales, her personal network and crowdsourcing.

An Indygogo campaign raised $13,500, which helped purchase a cosmetic truck. Butler plans to take her Lip Bar truck on a nationwide tour this month, starting in Los Angeles and San Francisco

“To be clear, we don’t want to make the truck our business. But the truck is less expensive than a brick-and-mortar and it’s a moving billboard,” Butler said.

In order to take the next step and expand Lip Bar’s offerings, she said she needs a strong investment partner or venture capital.

“The ultimate goal is to take the business back to my hometown,” Butler said. “And, bring the beauty back to Detroit.”

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